Industry Effects on the Use of Board and Institutional Investor Monitoring and Executive Incentive Compensation

This paper develops and empirically tests a theory of the use of board and institutional investor monitoring and the use of executive incentive compensation under different types of uncertainty in the industry. This empirical examination is based on a sample of U.S. firms operating in a wide range of industries. Practical implications derived from this paper direct the attention of both shareholders and governance specialists to critical tradeoffs involved in the use of specific governance mechanisms under demand, competitive, and technological uncertainty. We thank Vilmos Misangyi, Chamu Sundaramurthy, and Tom Becker for helpful comments on an early version of this article. We are grateful for the research funding for this paper from University of Delaware (General University Research Grant). Published: 2004 URL: http://www.business.uiuc.edu/Working_Papers/papers/04−0108.pdf INDUSTRY EFFECTS ON THE USE OF BOARD AND INSTITUTIONAL INVESTOR MONITORING AND EXECUTIVE INCENTIVE COMPENSATION Yasemin Y. Kor University of Delaware Department of Business Administration 214 Lerner Hall Orchard Road & Amstel Avenue Newark, DE 19716-2710 Phone: (302) 831-6187 Fax: (302) 831-4196 E-mail: [email protected] Sharon Watson University of Delaware Department of Business Administration 307 Lerner Hall Orchard Road & Amstel Avenue Newark, DE 19716-2710 Phone: (302) 831-4560 Fax: (302) 831-4196 E-mail: [email protected] Joseph T. Mahoney University of Illinois at Urbana-Champaign Department of Business Administration 350 Wohlers Hall 1206 South Sixth Street Champaign, IL 61820 Phone: (217) 244-8257 Fax: (217) 244-7969 E-mail: [email protected] We thank Vilmos Misangyi, Chamu Sundaramurthy, and Tom Becker for helpful comments on an early version of this article. We are grateful for the research funding for this paper from University of Delaware (General University Research Grant).